Wall Street rewards Alphabet and Amazon for new layoffs — here’s what we think

By News Room Last updated Jan 11, 2024

In strategic moves to reduce costs, Google-parent Alphabet and Amazon disclosed layoffs this week. The decisions were prudent and will allow the companies to redirect capital toward key growth areas. Wall Street seems to agree. During Thursday trading, both Club stocks hit multiyear highs. Google laid off hundreds of employees across its hardware, voice assistant, and engineering teams late Wednesday, the company confirmed to CNBC. Earlier in the day, Amazon sent out an internal memo to staff detailing plans to cut hundreds of jobs in its Prime Video and MGM Studios divisions. Amazon’s video game live streaming unit, Twitch, also announced 500 job cuts . The new rounds of tech company layoffs, albeit smaller than those in 2023, reflect continued efforts to pare down costs that ballooned during years of excessive hiring to meet Covid pandemic-fueled demand. Last January, Alphabet announced plans to cut 12,000 jobs. Around the same time, Amazon let go of a total of 27,000 employees. Several other tech giants, including Club names Meta Platforms , Microsoft and Salesforce , also made headcount reductions last year. The layoffs this year and in 2023 made sense because large tech firms have to make room for higher capital expenditures for investments in growth opportunities such as artificial intelligence in Google’s case and developing new content to compete with other streaming giants like Netflix and Disney in Amazon’s case. In forward-looking commentary following third-quarter earnings, Alphabet CEO Sundar Pichai said, “Teams are looking at ways to operate as efficiently as possible, focused on their biggest priorities.” One of those priorities for the company has been making investments to expand its artificial intelligence services in the cloud and Google Workspace. At Amazon, Mike Hopkins, who oversees MGM Studios and Prime Video, explained in Wednesday’s memo the reasons for the layoffs in those units: “We’ve identified opportunities to reduce or discontinue investments in certain areas while increasing our investment and focus on content and product initiatives that deliver the most impact.” (Jim Cramer’s Charitable Trust is long AMZN, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An illuminated Google logo is seen inside an office building in Zurich, Switzerland.

Arnd Wiegmann | Reuters

In strategic moves to reduce costs, Google-parent Alphabet and Amazon disclosed layoffs this week. The decisions were prudent and will allow the companies to redirect capital toward key growth areas.

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